Distribution strategy at Nestle Corporation and transportation of Maggi noodles

Question

Task: Analyze the transportation and distribution strategy of Nestle Corporation. Do you think the strategy of transportation of Maggi noodles requires revival?

Answer

Introduction
The paper will discuss the transportation and distribution strategy of Nestle Corporation and determine whether the transportation of Maggi noodles requires revamping. But first, it is better to provide an introduction to the terms, transportation and distribution. Transportation and distribution establish the movement of goods from one place to another. These products may be raw materials or finished goods and can be transported by road, water, cable, rail, air, pipeline and space.The activity entails the management of people, logistics, infrastructure and vehicles.Logistics as a part of transportationis designated as a system of procuring raw materials, producing and distributing materials and products on time, applying correct methods, and in appropriate quantity and quality (Boojihawon et al., 2021).Regarding industry, transport and distribution relates to handing over materials and products to consumers, government officers and business houses. Successful transportation and distribution can be established when there is proper coordination among the workers, distribution management and warehouse. Let’s evaluate the effectiveness of the transportation and distribution management at Nestle Corporation and determine whether it can achieve its goals through the transportation strategy of Maggi noodles.

Nestle Corporation: An overview
Nestle is a well-known food and beverage company, and it is globally recognized for its services in health, nutrition and wellness. The company started its operation in Switzerland in 1866, and within a period, it expanded its reach globally. The company is successfully running in international markets like the US, UK and Canada.The company has stuck to its mission, ' Good Food, Good Life. Nestle's products include chocolates, beverages, confectionery, desserts, Nestle Waters, Nestle Purina PetCare, and meals. In 2021 the company's annual profit was 17196, in contrast to 12372 in 2020 (Nestle.com, 2021).

Source: Nestle.com. (2021)

The company in 2013 found its place in the top ten highly recognized and applauded companies in the cultural category.Improving the life of the people and reducing carbon footprints is the only motive of the company. Through its health and nutrition solution, Nestle has cared for its customers, including their families. The company's objective is to help people live healthier lives through its products and services (Nestle.com, 2021).The company's principles are based on respecting its customers, future generations, global diversity, environment and culture.Nevertheless, the company faces stiff competition from other companies functioning in the food and beverage industry, like Cadbury, Mars Incorporated, Danone, Mondelez International, Inc., etc.

Selecting incoterms: Effectiveness of transportation of Maggi noodles
Choosing the appropriate Incoterms for a particular international trade transaction can be a critical decision for businesses. The right selection can help the buyer and the seller understands their responsibilities and avoid potential misunderstandings or disputes.The choice of Incoterms depends on several factors, including the type of goods being traded, the shipping method used, the buyer and seller's location, and the level of risk that each party is willing to assume.

The company uses the Free Onboard Vessel to ship its products to different countries.As per the International Chamber of Commerce, the application of this transit process makes the seller liable for all activities related to the product dispatch, starting from bringing the goods to the port, allowing the goods for export, and loading the goods on the correct ship chosen by the buyer. When the goods have been loaded, the buyer is responsible for all risks after that (Boojihawon et al., 2021).

The company regularly transits its products in bulk, including the transportation of Maggi noodles. Around 140,000 tons of consumer products are transported from around 1600 warehouses worldwide.In addition, the company uses partnership arrangements with third-party logistic service providers to transport and distribute its products. The service providers travel around 270 times globally daily. The products are primarily transferred from the manufacturing units to distribution centers and real consumers (Freudenberg and Nestle, 2020).

To improve the effectiveness of its transport facility for the transportation of Maggi noodles, Nestle may consider investing in newer and more efficient transport vehicles, implementing more optimized routes and schedules, providing regular training and professional development opportunities for drivers and other personnel, conducting regular maintenance and safety checks on vehicles and infrastructure, and utilizing data and analytics to inform better decision-making and resource allocation (Mirzabeiki et al., 2021). Ultimately, the effectiveness of a transport facility for the transportation of Maggi noodles will depend on various internal and external factors and may require ongoing evaluation and adaptation to changing needs and market conditions.

Transport and distribution approach of Nestle Corporation
Nestle has maintained a sustainable approach while performing its transportation and distribution responsibilities.The approach is centred on:
• Using the best distribution routes planning networks in its operations
• Improving the transportation facilities and using less harmful fuel-oriented transport modes
• Training the drivers in handling safety and environmental issues

To optimize the company's performance, the manager looking after the transportation of Maggi noodles and the logistics department concentrates on reducing the transportation of empty vessels, enhancing vehicle utilization, and looking after the distribution networks on a regular basis (Boojihawon et al., 2021).Nestle is working on its route planning to optimize its fleet operations. The company is adopting the faster mode of transport like sea and rail instead of road transport. The company is replacing fossil fuel with natural gas in its trucks to reduce the effect on the environment. Nestle is focusing on lowering its energy usage and shifting to renewable energyresources.The company is adopting innovative techniques in its transportation of Maggi noodles and distribution facilities to increase efficiency and reduce environmental impacts.

With active participation from its suppliers and consumers, Nestle is identifying opportunities to avoid running empty trucks on the road after the delivery of the products.For instance, the company has assigned a truck to gather raw materials from Dungannon and Craigavon in North Ireland and hand them over to the Wisbech factory in Cambridgeshire. After handing over the materials, the same truck is used to collect completed products from the Wisbech factory and hand them over to the distribution center in Warwickshire (Freudenberg and Nestle, 2020).Every time a vehicle offloads at any center, before leaving, it is loaded with materials to be delivered to other centers.The ongoing process of delivery of goods in any form helps in the maximum utilization of vehicles and makes the transportation of Maggi noodles efficient.

Selecting carriers for transportation at Nestle

Source: Nestle.com. (2021)

Nestle considers three factors while selecting a carrier for transportation and they are:
• Trimming down greenhouse emissions
• Reduction in cost
• Increasing efficiency

The thought process of Nestle behind selecting a carrier on the above three factors is discussed in detail in this section.

Modal shifts: Nestle is considering using the most appropriate transportation modes, which can aid in reducing gas emissions.The company uses the sea and rail routes instead of traditional modes. The shift in the transportation modal for the transportation of Maggi noodles has helped the company reduce its transportation of Maggi noodles costs, steer clear of traffic, increase efficiency, and reduce greenhouse emissions. By 2016, the company has shifted more than 360,000 tons of cereal products, petcare and water from road to rail through its EU Marco Polo project. The shift has led to more than 5000 trucks being withdrawn from the system. Using rail as a mode of transportation in France, Slovakia, the US, Italy and Germany, the company can save up to 2.8 million pounds in the years to come (Mirzabeiki et al., 2021). One of the newest rail transportation projects was Green Alpes, which distributed products and raw materials from Italy and France.The water project of the company majorly relies on rail transportation for faster and bulk deliveries.It was found that 30 per cent of the transportation in 2014 was done through rail, including 33 per cent of water products delivered in Italy and 43 per cent in the UK. The change in the transportation of Maggi noodles and other products has improved the distribution system by 10 per cent and reduced greenhouse emissions by 23 per cent. Nestle has also implemented rail transport in Japan with the help of its logistics and shipper service providers (Mirzabeiki et al., 2021).

Fleet vehicles for transportation of Maggi noodles: There was a time when Nestle had over 2000 fleets of trucks for distribution and dispatching of ice-creams and pizza to its customers.The technological advancements have led Nestle to use eutectic freezer plates that help to cool down the freezer of the trucks at night when it is standing at the distribution centers.In addition, to reduce the idle time of the trucks, the company has installed GPS systems that help track their position. As a result, in the last years, the company has managed to reduce idle time by 32 per cent, thereby saving many gallons of fuel (Payaud, 2013).

Use of substitute fuels:To reduce its carbon emissions, the company has continuously looked for alternative options like using environment-friendly fuels.The water project in North America is being run by trucks using gasoline. The company is looking to increase the number of trucks from 28 to 200 in the coming years.The company has utilized 15 trucks in Italy for its water project that runs on liquid natural gas; similarly, in Thailand, it has used trucks plying on natural gas (Porcelli, 2018).

Optimizing capacity of vehicles:It is known that vehicles running without any load or having less load add to the costs of any company. Still, Nestle has always tried to use the capacity of its vehicles to the maximum. The company's 'no vehicle leaves empty' approach is an initiative to reduce pollution. Therefore, the company has planned and combined its inbound and outbound trucks to utilize their maximum capacity.

Reducing costs and pollution: With the help of its suppliers and consumers, Nestle is trying to remove empty trucks from the roads, which can help cut transportation costs for transportation of Maggi noodlesand reduce environmental pollution.The company is monitoring all its transportation facilities, including the transportation of Maggi noodles so that none run without any load.Different transport control centers look after and identify trucks running without any load.

Distribution network: 10 distribution channels the company worldwide in 2015 was revamped, which helped enhance its transport and increased its distribution efficiency.The company in the Middle East has merged its packaging, warehouses, import and export, and distribution centers into one. As a result, it has helped to reduce the empty trips of trucks from one location to another. The step has helped the company reduce tons of carbon dioxide annually. Similarly, in Italy, 2 distribution centers were combined by the company, which helped it reduce the distribution cost (Ren et al., 2020).

Conclusion
In the context of a large company like Nestle, the effectiveness of transportation of Maggi noodles will depend on the scale and complexity of its operations, the nature of the products being transported, and the geographic scope of its supply chain.Nestle has repeatedly proved that it has utilized effective and efficient strategies in its transportation of Maggi noodles and distribution systems.The company is investing in projects with a vision to reduce its transportation costs and carbon emission.The company is regularly taking initiatives in the field of optimizing the usage of vehicle capacity, cutting fuel costs, using environment-friendly products and removing empty trucks from roads. Its efficient transportation of Maggi noodles has improved its distribution networks and optimized route planning.

References
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